Already facing a slew of issues from Covid to non-cooperative countries, the conference also suffered early operational setbacks from extreme weather. The UK experienced fierce winds and hurricanes, leaving attendees stranded in London Euston after opting for emission-friendly transport. The irony was not lost on many who were forced to fly to Scotland and reinforced the critical need for change – and the conference itself.
Attending countries are all expected to reaffirm their commitments to global net zero by 2050, but will we see the level of international cooperation needed to combat the climate emergency?
In the reporting world, this question is the one activists and regulators alike hope will be answered with the arrival of long-awaited international sustainability reporting standards.
Currently, there exists a mosaic of mostly voluntary frameworks that aim to help companies improve their reporting on climate and sustainability issues, commonly known by their tongue-twisting acronyms: GRI, SASB, TCFD, SDGs, PRI, and so on. The resultant lack of uniform and consistent sustainability disclosures across countries and sectors is often cited by investors as a key challenge in effectively allocating capital to truly ‘green’ organisations. A set of common, unified sustainability standards would allow financial institutions to more effectively and rapidly assess the sustainability profile of a greater range of organisations, and invest accordingly.
The first step towards this goal could be realised in Glasgow, with the recently announced International Sustainability Standards Board (ISSB), overseen by the IFRS Foundation, expected to launch at the summit. The ISSB will be responsible for establishing and assembling a set of unified standards, and guiding companies on how best to report against them. Could this move kick-start a real step change in sustainability reporting?
Ratings agency Fitch Ratings anticipates the ISSB becoming the dominant standard setter, given its stated ambition to build upon the work of existing framework creators including the Value Reporting Foundation, Global Reporting Initiative and Task Force for Climate-related Financial Disclosures. The new body will also benefit from the status of its sister organisation, the International Accounting Standards Board (IASB).
Fitch also expects the sustainability standards themselves to evolve quickly, in comparison to the decades-long development of international accounting standards, citing the sense of urgency around coherent sustainability standards and widespread government and regulatory support for the ISSB concept.
However, the creation of international sustainability standards alone is unlikely to be an instant panacea to sustainability reporting headaches. As well as the task of implementing such standards into legislation, which governments and regulators must handle themselves, there is a tension at the heart of the concept: the standards must be both widely adoptable yet comprehensive and meaningful enough to move the needle towards net zero. Too fierce, and the standards risk lack of support, particularly in economies that still rely on less sustainable industries and infrastructure. On the other hand, standards with too low a baseline may not fully allow investors to understand the financially material impacts associated with climate risk.
With countries, companies, and investors calling for more ambitious climate targets, we will soon see whether Glasgow lives up to the promises of Paris, but we will have to wait until 2022 to see how the ISSB’s work will unfold.
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